Dr. Carl Hahn. picture courtesy Yahoo.Finance
Sadly, Dr. Carl Hahn, one of Volkswagen’s best CEOs, left us last week at the age of 96. I had the honor of working for him when I was a very young copywriter, and when he was the CEO of Continental Tires. I also worked for on the Volkswagen account a lot after Hahn returned to Volkswagen in 1982. Hahn was famous for having turned the Beetle from a Nazi car into an American cult, and for bringing Volkswagen to China, now by far the largest market of Volkswagen’s empire. Back when, and now in many eulogies, Hahn was praised for his long-term strategic thinking and foresight.
Here is the truth about Volkswagen and China, as told to me by Hahn’s right hand man and multipurpose executive Werner “W.P.” Schmidt, who also departed from the living a few years ago.
In 1982, Deng Xiaoping succeeded the austere Zedong as Chairman, and he quickly set out to make China less ascetic. He set the foundation for China’s dominating role in the electronics market by turning Shenzhen into a special economic zone where capitalism was allowed to sprout, and he made a decision that led to China becoming the world’s (and Volkswagen’s) largest auto market.
Back when, whatever there was of a Chinese auto industry was rooted in Russia, a land better known for trucks, tanks and farm implements.
Deng summoned his minister in charge of building trucks, tanks and farm implements, and told him to contact the world’s best automakers and invite them to come to China. The offer was a billion people market with nearly zero cars, the price was to enter into joint ventures with domestic automakers.
The best-known German OEM in China was “Benz.” So the minister and his entourage, all still decked out in blue Mao-suits, traveled to Stuttgart to invite Daimler-Benz to make cars in China.
“We’ll gladly supply you with any number of cars,” was the answer. Looking down their noses as only haughty Daimler executives could, they continued: “But making cars in China? Impossible.”
The rebuffed Chinese delegation looked out of the window of the old “Daimler-Hochhaus” in Untertürkheim, pointed at the small, round cars that were whizzing around the streets below and asked whether those also are Benzes.
“Those? Excuse me?”
Further inquiries led to the revelation that the small, round cars were “Volkswagens.” And when the translator told the mission from China that “Volkswagen” means “”People’s Car,” interest was piqued to the max.
The delegation boarded a train to Hannover, changed to a rickety local train to Wolfsburg, and without an invitation appeared at “Wache Sandkamp,” Volkswagen’s main factory gate. They told the guard that they wanted to speak “to the boss.” The poor guard did not dare to call Hahn’s assistant, but Hahn’s multipurpose executive W.P. Schmidt was a man of the people, and he always was up for a short chat at the guardhouse. Schmidt quickly ascertained that the blue-clad gentlemen indeed held high positions in China, so they were ushered to his office, where they made their pitch.
A few days later, Schmidt and Hahn were at the bar for some sundowners, and Schmidt said to Hahn:
“Remember that you said a few weeks ago, that China would be a heck of a market? A billion people, no cars?”
“Sure did.”
“Guess who was here?”
A formal invitation was quickly dispatched to Bejing, and a “grosser Bahnhof” (maximum shindig) was laid on for the invitees.
On stage at the “Räderhalle” in Wolfsburg, so called because the walls were adorned with huge sprocket wheels, were all cars Volkswagen had in the program, from said round Beetle to Volkswagen’s best-selling hatchbacks Polo, Golf, Scirocco, Passat, to the just-introduced Santana, a Passat-based three-box car.
The minister walked up to a black Santana, and said: “This one.”
And so happened Volkswagen’s opening of the Chinese market. At home in Germany, and in the U.S., the Santana was a disaster, in China, it turned into a smash hit, along with the Golf-derived Jetta, another car unloved by Volkswagen execs. In Germany, production of the Santana was terminated after a few years, which led to the rumor that because the Santana was a dud, its tooling was shipped to China. Well, the tooling indeed was shipped to China in the end, but the decision to bring the Santana to China was made on the stage of the Räderhalle when the Santana was barely launched.
